Ladies and gentlemen, thank you for standing by, and welcome to the Public Storage Second Quarter 2019 Earnings Call. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Ryan Burke, Vice President of Investor Relations. Ryan, you may begin.

Thank you, Brandy. Good day, everyone. Thank you for joining us for the second quarter 2019 earnings call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that all statements, other than statements of historical fact included on this call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected by the statement. These risks and other factors could adversely affect our business and future results that are described in yesterday's earnings release and in our reports filed with the SEC. All forward-looking statements speak only as of today, July 31, 2019. We assume no obligation to update or revise any of these statements, whether as a result of new information, future events or otherwise. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, SEC reports, and an audio webcast replay of this conference call on our Web site at publicstorage.com. We do ask that you limit yourself to two questions, but of course feel free to jump back in the queue for any additional questions or follow-up. With that, I'll turn the call over to Joe.

Thank you, Ryan. And thank you for joining us. We had a good quarter. And now, I'd like to open the call for your questions.

Thank you. [Operator Instructions] Your first question comes from Shirley Wu of Bank of America.

Hi, good morning, guys. So, my first question relates to street rates. How did 2Q trend and so far in July as well, and also your move-in rates?

Sure. Yes, street rates were roughly flat in the quarter. But as we've talked about in the past, we focus more on move-in rates as those are the rates that customers will ultimately pay us once they become a customer. Our move-in rates were down 4% for the quarter, and this was the lever that we use to drive move-in volume. Our move-in volumes were flat year-over-year, which is one of the better quarters we've seen on move-in trends over the past couple years. In terms of other levers that we utilized in order to drive that move-in performance, advertising clearly being one of them. And a little bit less in promotional discounts. But flat on street rates and down 4% on move-in rate.

Got it. And that's trended so far as well in July?

Yes, we're taking just in trends we we've gotten into July.

Okay. So, and a follow-up to your marketing comment, so if [indiscernible] remains elevated, and it's a lever that you guys are pushing a little bit more. How should we think about the run rate for the rest of '19 versus the site concession?

Yes, well advertising has clearly been a lever that we've been pushing on through 2018 and into 2019 to drive volume. And those incremental move-ins from that channel support what is overall tougher move-in environment, and we like what we're seeing there. Public Storage has real advantages online with our brand name and our scale in local markets with which we can drive move-ins into the local inventory. It's the power of the Public Storage platform online. Advertising was up 49% in the quarter that follows up 28% quarter in the first quarter. And as I've said in prior calls, we're going to continue to push on that lever as we see good returns there. So I'd expect that we continue to utilize that lever in the second-half of '19 as well. In terms of other levers, we talked about using move-in rates and promotional discounts. While promotional discounts were down in the quarter, that is a method that we continue to use, primarily our $1 special for the first month rent, and we'll continue to use that through the second-half of '19 as well.

Great. Thanks for the color.

Your next question comes from the line of Jeremy Metz of BMO Capital Markets.

Hi guys. Joe, just wondering if you can comment on the revenue growth here, the 1.9%, just wondering how that fared relative to your expectations? And then as we look at the trajectory, supply coming on here, the softness in demand you guys have spoken about. Would we be off base expected to trend back lower from here and into 2020?

So, yes, Jeremy, I think, first of all, certainly we were encouraged by the fact that we saw another step up in our revenue growth, so have been seeing acceleration if you look at the quarter-to-quarter performance sequentially over the last few quarters. Tom just reviewed one of the important ingredients and unique capabilities that we've got relative to leveraging the power of our brand, the initiatives we've got around customer search efforts, and the things that we do operationally that continue to give us tools to navigate what clearly continues to be market-to-market, in some cases, a heavy level of competition that is with us and could be with us for some period of time. We've been now in this band, say the 1% to 2% revenue range, you can look at our predicted metrics going into Q3 kind of puts us in that same range more or less. The things that we continue to use and drive relative to the capabilities however are encouraging because, again, quarter-to-quarter we're unlocking and using different tools and different levers to continue to drive the level of activity, customer acquisition, and things that we can do to operate, again, in some cases a very competitive market. Supply, as I mentioned, is going to be with us this year our tracking points, so again another year of about $5 billion worth of deliveries. We think in 2020 it's going to taper down a bit, maybe 10% to 15%, but you can't ignore the fact that's still heavy. It is shifting, and we've talked about that for the last few quarters from some of the more heavily impacted markets that got hit early in the cycle, to markets now that we've got even more focus on knowing that we're going to have to, again, ramp up our efforts to compete with new supply, whether it's in a market like Miami, Boston, Portland, Oregon. So we're keep a very close eye, and again, getting geared up to make sure that we're effective there as we've been over the last few quarters dealing with these other markets that have been hit hard. But the good news is the resiliency of the business overall is strong. Our customer base encourages us because we're seeing really no different behavior. Customers continue to be quite sticky. And again, it talks to the overall resiliency, coupled with the fact that our own capabilities of scale, the brand, and the technological tools that we're continuing to develop are working well.

Yes, and so it sounds pretty fair, a lot of it is internal, no real change of view on supply, if I heard you correct. I mean sort of in line with what you've been forecasting. Is that fair?

That's fair. And again there's -- without question it kind of points to on the flipside what we've been seeing on the acquisition front. There is a growing pool of owners out there that are taking product to market; they've got more sensible expectations relative to exit values. So we're seeing some good opportunities evolve on that end of the spectrum. But at the same time many developers still look at this product as very attractive product to be built, whether it's to own short-term or long-term and/or just flip because in some cases they can make good returns even in an environment where we're seeing many markets oversupplied. So, again, we're dealing with these levels of deliveries, as an industry, we haven't seen before. And as we all know, it can take anywhere from two, three, or four years in many cases for these deliveries to get stabilized. And until they are it's a competitive factor you've got to deal with.

All right. And second for me, and you just touched on it a little, but if I look at where you're buying in terms of price per pound and I look at where you're able to do the expansions and the developments, and even the yields you've talked about in the past, it seems like a pretty good tradeoff here. So just wondering what, if anything is holding you back from doing more development and expansions just given that obviously capital isn't an issue. Is it just human capital; is it the availability of site or expansion potential as you look at it?

Well, I mean there's a few things in the mix there, Jeremy. So, one of the things that we've talked about is the fact that we've got a pool of assets that in some cases we've owned for three or four decades that continually become good candidates for potential expansions. Now, you can look at that and say, okay, just go do it all at once or tackle it at one time, but property-to-property, city-to-city you have to work through a variety of different entitlement processes. In some cases you can't make any changes, and others you have to go into negotiations or processes that could take months, years in some cases. So you've got that factor at hand. And then the other thing that we're very cognizant of is the impact that any expansion creates to an existing revenue stream on a particular asset, so you've got to calibrate around all those factors. The things that we've been able to do is identify and leverage the skills that we've got in our development team into that effort. So you've seen on a proportionate basis, as we stand today, about 64% of our overall development pipeline is tying to redevelopment. Now the thing that has been trending down over the last few quarters, we haven't seen as many land opportunities that have been attractive, but there's some level of similarity with what's going on with land as it relates to what we're seeing on just pure acquisitions. Meaning there are a broader pool of owners out there that we're seeing, they're coming to us and saying, "Hey, I've got a piece of property, thought I was going to take it through full entitlement or maybe it's already entitled, but I'm not going to take that next step to develop." So, we're encouraged by that. And the development team is out working hard to pull even more of those opportunities in one by one, particularly if they not only make sense in the near-term but long-term as well. So we've got, I think, some good opportunities in that realm going into the cycle that we're seeing ahead of us too. So, thanks Jeremy. I think we're going to take the next question.

Thanks.

Your next question comes from the line of Todd Thomas of KeyBanc Capital Markets.

Hi, good morning. First question, Tom, back to the move-in rent, so $13.81 square foot in the quarter, higher by about $0.22 a square foot. Historically the seasonal uptick is a little bit greater from 1Q to 2Q, and then rents tend to decline on a seasonally adjusted basis throughout the off-peak season. Is the more muted increase this quarter indicative of the pressure you're seeing across the system, and would you expect the same seasonal patterns to hold throughout the balance of the year or have you made some changes to pricing or otherwise that might cause the seasonal trends to change a little bit. I was just wondering if you could speak to that.

Yes, sure. I did comment earlier around moving rates being down 4% year-over-year, which certainly takes into consideration some of the seasonality of our rental rates as we go through. I think generally speaking you're going to continue to see the seasonality as our occupancy and our move-in traffic is higher in the summer months that it is as we get into the fall and winter months. So the seasonality is not going to change. But we did use lower move-in rates in the second quarter as one of the levers to drive volume. So to give you an example, Miami, which is a tougher market that Joe highlighted, where we're seeing new supply impact operations there. We were successful in driving move-in traffic there. Move-ins were up year-over-year despite the incremental new supply, but we did utilize rate and advertising. So rates were down, call it, 7%-8% on move-ins in Miami in the second quarter. So, there's no question that there is rate pressure where there's new supply. And we're also utilizing rate to drive volume in some of those markets.

Okay. And then as you push through rate increases to existing customers during the quarter, and usually May, June, and July are bigger months for that. Any pushback or change from customers or change in the rent increase program throughout the peak season as results started to come in? And then maybe in a market, like Miami, where there is some rate pressure and you have customers moving in at lower initial rates, is there any difference in sort of the rate increase program in those markets and at those stores relative to the balance of the portfolio?

Sure. So the first component around just performance and existing tenants and the willingness to continue to remain customers post a rate increase to the rental rates, and so that's very consistent, in fact trending positively as we've gone through the quarter. So we disclosed in the 10-Q move-out volumes were down, which is what drove the increase in occupancy throughout the quarter, average up 20 basis points and actually finished up 50 basis points in the quarter. So, while move-ins were flat, move-outs were down, and that's because that existing kind of base is performing quite well. The existing tenants are exhibiting great dynamics. You look at delinquency numbers; they're supported by wage growth, the great labor market. So lots of good things happening there for existing tenants, and we continue to see that throughout the portfolio. In terms of rate strategies in different markets, certainly what's going on with the move-in and move-out dynamics within a local market will impact our strategies for existing tenant rate increases. I'm not going to go into detail there, but certainly those are some of the factors considered. In terms of how things have trended into July, move-outs are down again in July, so again very consistent trends.

Okay, thank you.

Your next question comes from Ronald Kamdem of Morgan Stanley.

Hey, just two quick ones from me. One, just going back to sort of the move-in volumes that you touched on, given the elevated marketing spend, the question really is, is there any change in the profile of the customer that's moving in today maybe versus a year ago? So, is that another way, is it more millennial or is it -- is there just no discernible trend on that? And sort of a follow-up to that would also be when you think about the returns that you are getting on the marketing spend, is that something that remains compelling where we can even see it increased even from these levels? Thanks.

So, yes, Ron, I'll take the first part of that and hand it over to Tom to talk about second part of your question. So from a customer standpoint, I wouldn't point you at anything that shifted materially whether you link it to millennials are becoming a different type of customer. The good news is they are becoming good customers period, and there is no both of statistically and/or trend that we could point to that says that that's any different than what we have seen with other generations as they age into the kinds of things that drive them to buy to take down a self storage unit. So many of the very similar and same drivers that have affected prior generations are too now affecting millennial. You could even argue there is at the end of the day as we speak today maybe fewer home owners out there that are much more sensitized to the cost of owning a home. They are looking at smaller apartments. They are making trade off of keeping their stuff in lower cost alternatives and storage fits quite well with that. We are seeing good traction. We are doing a lot of surveys relative to the types of customers that are coming into us, and again, no change there. In fact, we are continually encouraged that that too is evolving into a very powerful type of consumer that we see driving our business just as other generations have. Tom, you want to take next part?

Sur. Yes, the second part of the question was on marketing spend and the return we are seeing associated with it. The comments I made earlier, we are seeing good returns. It is a process here that's managed very dynamically at the keyword level and local level such that we are adjusting our bids based on the demand response that we are receiving and the returns we are receiving. The returns have been good. And so we are pushing ever harder on that lever as we move through 2019, and we will continue. But we will also continue to monitor that and ensure we are getting the return that we seek. But returns are good there and we like that strategy.

Great. I don't know if that was two questions, but the last quick one just on just looking the West Coast markets clearly some of the strongest performers there. And I think you have talked historically about limited supply. But maybe can you talk about what the sort of the existing tenant there? And if there is any rent fatigue given that it has been a couple of years of rent increases? Or, you are not seeing any noticeable trends? Thank you.

No, noticeable trends there. The difference between some of those West Coast markets is while I talked about Miami and moving rates been lower, Los Angeles moving rates were higher in the quarter. So, there is different trends going on in those different markets.

Yes. And just to add that, from supply standpoint you are correct. I mean the West Coast has been basically shielded from the amount of volume. From a supply standpoint, we really don't see that changing again just because of lack of land inventory entitlement, complexity. Portland is under some stress right now. But outside of Portland, we feel very good about the competitive arena on the West Coast.

Thank you.

Your next question comes from the line of Smedes Rose of Citigroup.

Hi, thank you. Your acquisition opportunities still seem elevated. And I was just wondering if you could talk a little bit about what you are seeing in terms of opportunities that are still in lease up versus stabilized? Are more lease up opportunities coming available to you that are interesting, or maybe just some color on the overall acquisition outlook?

Yes, Semedes. There are a variety of different reasons we have seen the uptick in acquisitions volumes. It's included -- some owners that have come to us directly, they haven't taken their properties out to market whether it's because again they are under some level of duress and/or they just made a decision that on the exit either specific property for whatever size platform they may have. And with that, we've seen a variety of different occupancy levels. We continue to look at properties that range anywhere from either newly developed and/or fully stabilized. I can point you to -- we did a four-building acquisition in the Miami area. Each of the buildings had different levels of occupancy, one or two or more stabilized and the other two that have been more recently delivered to the market. So there's a range there. And we are seeing and hearing that there are also there's a lot of activity out there relative to particularly within the brokerage community. Brokers are being asked to come in and do valuations for owners. In the last quarter, we saw a lot of inquiries coming into us with again a full range of different types of situations, let's just call it that. All of which we consider, we underwrite, we take a look at. So we really haven't changed. On our end the way that we analyze -- we continue to analyze and look at returns that we can get from these investments. What we are seeing are sellers that are far more agreeable and more anxious to make a decision to exit. And Tom again, has gone to maybe clear and more evident levels of stress. Others again, have just made a more rational decision and said, it's time and a good point in the cycle to consider an exit at maybe a level or a price that one or two years ago was much more elevated and we wouldn't have engaged from a conversation and today we are. So as we reported we've done more transaction volume this year than we did all of last year. We've got about $87 million under contract, and we're seeing again, beyond that good activity and [indiscernible] some of the situations that are playing through.

Thanks. And I mean, just to follow-up on that, do you think? I mean, you mentioned supply, the dollar amount of deliveries coming down next year? I guess most of that is probably finance and under construction. Do you have a sense of just looking out further than that? I mean, do you think the lenders are now starting to rethink, the availability of capital to the industry, and we can start seeing those supply numbers really start to drop off pretty quickly?

Yes, that's tough to predict. There's a number of different conflicting drivers that are still in the mix. So there are still a lot of investors, private equity, and otherwise that are coming into the sector that haven't been in self-storage before. So there's some fuel that comes from that. As I mentioned, there are still, development returns that some individual developers are going to look at and say it's still a good reward risk balance. So the May launch and still may get the funding to do it. On the flip side, I don't disagree with your comment that I think more and more lenders are becoming more stringent in the way that they're underwriting and basically putting, lending packages out to developers. So hopefully that creates some level of added discipline we haven't seen. But, again, there's still fuel out there. And like I said, we're, sensing that there's likely to be in a 10% to 15% stage or shift down going from this year to next year. But that still puts you north of $4 billion of deliveries. That's a lot of products. So we're keeping a very close eye, if we're not confused about how it impacts certain markets, as I mentioned earlier, and the good news is we feel more and more encouraged that we've got the playbook to continue to navigate around us.

Okay, thank you.

Your next question comes from the line of Steve Sakwa of Evercore.

Thanks. I guess most of my questions have been answered at this point, but just in terms of maybe business customers, any sort of change or anything new that you're seeing on that front, as customers, kind of looking to come into the self-storage product.

Yes, Steve, I couldn't say something materially different. We have and will continue to embrace I would say a healthy level of business-related customers that ranges anywhere from -- something is tried and through to the landscape or a local contractor to maybe in today's world, some customers that are playing into again, this last mile distribution, focus and again, different types of entrepreneurs and/or even more sizable companies that do feel it sensible to have something in close proximity to another facility or a customer base et cetera. It can range from a percentage standpoint, property anywhere from easily say 10%, 15%, 20% so sometimes it's much higher. Again, depending on the location of a particular property, so, there's -- again, I would say, a consistent and good amount of activity that we see just from business customers. And we embrace and cater them just as much as we do to individual and trying to consumers.

Okay, and I guess just one other question, you've done some very, very large facilities, like Gerard up in the Bronx, several thousand storage facilities in units. Are there any kind of lessons you've learned off of some of these is this, kind of the economic returns to pencil out? How do you sort of look at that, as the few that you've done, and kind of the pace of those going forward?

Well, we certainly have done more Gerard, we've got now several facilities that are close, and in fact, Jersey City is now larger than Gerard. Jersey City is our largest current system, our current property in our system, about 4200 units, we open that just a little over two years ago, today, it's nearly 90% occupied. So what leads us to and how we basically place design and configure something of that magnitude in the market is we use a lot of analytics, we look at the level of competitive activity and then we take a lot of the day-to-day metrics, we see in light properties that we may own a particular area to decide how big to go. But there's no question the bigger facilities like this create another level of complexity. That again, we have to tune our operational teams to, again handle. So Jersey City, it wouldn't be unusual for instances as we filled that property up to have 40 to 50 movements, literally in a weekend. And if you bench that against kind of a traditional size, storage facility, that might be a volume you see in a month. So you've got to have a team of people, running the asset, you've got at a different level, you've got different complexity relative to the design of the facility itself, number of elevators, the way the Florida floor configuration works on unit sizes. And with the amenities, though, however, with these configure facilities, customers level and again, they are very efficient, very customer service oriented, because we're running again, larger teams that are, clearly accessible and out the counter. Well, we're, opened all day long. And, again, we're looking at expanding that platform where it makes sense in many different parts of the country. So, that's too though, if I connect that to some of the activity that we're seeing on the acquisition side. Naively a number of owners or developers have come into the business thinking. Okay, it's a good idea to just go as big as we can, we'll go into the city. We will, if we were thinking about building a 50, or 75,000 square foot product, will go to 100,000 or 125,000 or even in some cases larger than that, without the skill, knowledge, and capability to actually run a facility of that size. And it's not unusual. And we see a time and again, where a facility like that can get to 50% or 60%, occupied, and it just stalls, because if you don't have the ability to drive volume. Understand how to cater to existing customers. If you haven't got the right technology capabilities or day-to-day customer service, you're going to, you're going to flat line. Now that creates so many cases, its a good opportunity for us, and we're seeing more and more of them.

Okay, thank you very much.

Thank you.

[Operator Instructions] Your next question is from Eric Frankel of Green Street Advisors.

Thank you, I just like to circle back on the marketing expense. How exactly do you calculate the return on investment for an increased for the increase in marketing? And how much the increasing market is just seeing the increase in click rates online and just how are much yet to pay you Google?

Yes, sure. So without getting into too much detail as to how returns are calculated, it's a pretty simple concept around what's a customer worth to us and what are the acquisition costs all in, which it takes to acquire that customer and ultimately get them to move in. And so, we have the ability in today's world online to track and understand much more about our customers and to be able to tune that those bids, much more dynamically than been done in the past. So we can monitor those returns on a customer-by-customer basis and really the keyword-by-keyword basis.

Okay.

Okay. In terms of the overall cost and the competitiveness online, there is no question that we are not the only one pushing on this lever. Some of our traditional operating competitors are pushing on that lever as well and probably seeing similar good returns. So we would expect that to continue. In addition, we have other folks both regional operators as well as valet storage operators and other types of folks that are bidding on keyword and driving the cost-per-click higher. I think on the last call, I noted that cost-per-click for similar positioning was probably at double digits, maybe call it a team, it's north of that today.

Okay, that's helpful color. Thank you. Just quick follow-up question. I just noticed in your Q that you expect to spend roughly $1.1 billion on investments over the next year or so. That's actually down from $1.4 billion last quarter. And so your comments have kind of implied that you are seeing it as expanding many of the investment opportunities. So I guess you are not budgeting as much as. Is there a reason for the disconnect?

I think if you are looking at liquidity and capital resource analysis, we highlight that we have capital resources of about $1.1 billion. But then when you walk through the usage, a lot of them haven't been identified. So, one of the clear usages are development pipeline. Which as it stands today, we have about $329 million of cash required to complete that existing pipeline. But as Joe mentioned, we will be adding properties to that pipeline over time. But we would expect to spend that $330 million roughly over the next 18 months. In addition to that, we have acquisitions that are under contract at quarter end that Joe highlighted earlier, around $87 million. And we are seeing more opportunities there. So we would expect more acquisitions as we move through the year. But the $1.1 billion is really our capital resources which are the cash on hand that we have, the revolver capacity as well as retained cash flow over the next 12 months.

Got you. So the revolver capacity is kind of the limitation on that number?

No, I mean we could go out like we did in the second quarter and raise additional capital if there is opportunities that match. The financing environment right is pretty attractive from a rate standpoint. We could issue 10-year bonds today touch under 3%. Preferred are probably around 5%, maybe a touch under 5%. So, attractive capital market to finance incremental capital needs over the next 12 months.

Right, right. Sorry. Okay, got you. Thank you.

Your next question comes from the line of Todd Stender of Wells Fargo.

Hi, just on the third party management platform, can we just hear I guess how it is performing? And then since you are being so acquisitive, you are obviously talking to potential sellers. Is third party management brought up in those conversations if you get a potential reluctant seller that you can manage, just maybe just some color there?

Yes, there a number of things that we continue to see and learn through our entrance into the third party management business. So, the program continues to grow. Our backlog is building. The backlog as we expected will take time to turn into actual opening because it's primarily oriented towards either pre and/or in development opportunities. We have now got -- this year we have added about 23 properties to the program in total. Our entire program is 62 properties. But we are seeing and learning many different elements of the business as a whole including a number of owners that may have a range of different horizons to ownership whether it's more limited time or it could be longstanding. So with that we are going to come variety of different potential opportunities. The other things that's not surprising but there is a bit of activity around just owners that are looking for a change as well. So we are seeing some activity tied to that whether under a public third party management platform or a private one. So again we are seeing good opportunities there, we're able to balance. And now with the team built internally drive activity into even more markets that we want to grow from a scale and presence standpoint, so we've got more outbound activity time tied to that. And again as I mentioned a variety of different situations that could be interesting over time.

Okay, that's helpful. And then just to go circle back with the acquisitions, I don't know if you characterized what you bought in Q2 and then what you have teed-up in Q3 but just roughly the ones that are stabilized versus those in lease up and maybe just the rents. What kind of upside do you expect in these properties, are they stabilized or what kind of growth in rents can we expect?

Well it's like, I talked a little about this earlier, it's a mix. So we've got property to property, a variety of different either occupancy and stabilize revenue components to the assets themselves, some have been in place for a number of years, some are newer and again a typical again trajectory that a property goes through. You might see a quick lease up. But then from a maturity standpoint, the revenue doesn't stabilize for years beyond that until you look at again a tenant base that becomes more mature. So we're looking and seeing good returns relative to the investment we're making into the pool of assets that we continue to buy. And it's a collection of all of those factors. So again the other thing I mentioned we like and are spending more time with a number of situations, we haven't seen over the last couple of years, so the acquisition teams focused on those opportunities as we speak.

Yes, and Steve, maybe I just point you to the 10-Q where we break out on Page 48, what the occupancy and rate numbers are for those acquisitions and you can see the 2019 acquisition at 78.2% occupancy. So clearly there's some lease up within some of the acquisitions that Joe speaking to and likely rent growth as those lease up as well.

Great, thank you.

Your next question comes from the line of Michael Mueller of JPMorgan.

Yes, hi. Most things been answered as well but I was wondering what was the average effective rate increase that you were able to pass through to existing customers this year?

I would say trends have been very consistent there. As we've talked about in the past that that does move throughout the year both in terms of quantity as well as rate based on what we're seeing in our market is averages are around that kind of high single digits 10% type number but no real change there from a strategy standpoint.

Okay. That was it, thank you.

Your next question comes from the line of Ki Bin Kim of SunTrust.

Thanks. Good morning all there. Your debt to preferred equity ratio is about 33%. Do you have a view on longer term what that mix should look like?

Longer term, we said we're committed to both of those markets as financing tools. They're both provide great attributes. We thought it made a lot of good sense back in the fall of 2017 to really add debt to the playbook in order to finance acquisitions and really gives us access to a deeper institutional pool of capital that allows us to raise more in a shorter period of time to fund acquisition opportunities. And so, as we look at those two markets, I would expect that we continue to utilize both. As you highlight right now about 33% of that is debt and about 67% of it is preferred stock. We don't have a particular target where we're going to target a specific number but I would expect that we utilize both going forward.

But in the current environment does one look more appealing than other?

They look frankly both looked pretty good right now the gap between a 10 year bond and preferred stock offering today is around 200 basis points which is pretty consistent with the post-crisis averages. So pretty consistent, we obviously just raised $500 million of 10-year bonds in April, we redeemed 6% preferreds because they were in the money at the end of June as we go through the year, we've got five and seven eighths preferreds that are callable in December that certainly are in the money as we look at them right now. So I would expect there certainly could be an opportunity to add preferred stock to the capital stack as we go through the year in addition to what we did with bonds earlier.

Okay. And just going back to the advertising question, you said you're getting a good return on advertising spend. I'm sure the utility curve to everything, right. Where do you think we are in that utility curve of getting a good return on advertising?

Yes, we're still seeing good returns and so that you've seen us increase our spend throughout the period. There are some keywords that certainly are at levels that we feel comfortable with where we are and there's others that we can increase further and it will depend on the traffic we see in our local markets as we dynamically evaluate that, but returns have been good. And that's very much a decision that is at the very local and granular level not at the aggregate level.

Okay, thank you.

Thank you. At this time, I'll now hand the floor back over to Ryan for any closing or additional comments.

Thank you, Brandy, and thanks to all of you for joining us today. Enjoy the rest of your summer.

Thank you. That does conclude today's conference call. You may now disconnect.